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The European Commission this week cast doubts on the sufficiency of Malta’s measures to combat money-laundering – an issue that has thrust the country into the limelight with various European Union institutions on account of suspicions over the Individual Investor Programme, the country’s teeming trust and fiduciary system, the remote gaming sector and the leaked draft Financial Intelligence Analysis Unit reports which are now the subject of a number of magisterial inquiries.

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Although the government had adopted the EU’s Fourth Anti-Money Laundering Directive at the 11th hour last December, apparently under no small degree of duress, the EC’s European Semester Winter Package, which reviews member states’ progress on economic and social priorities, appears to cast the measures adopted by Malta into doubt.

The Commission’s staff working document makes it clear that matters do not end with Malta’s “notification of a complete transposition of the Anti-Money Laundering Directive” in December 2017.

The report, in fact, states: “Further analysis is needed to assess if these measures are sufficient to ensure an effective framework for the fight against money laundering and terrorist financing.”

The report also clearly notes that for Malta, “ensuring effective financial supervision remains a challenge”.

It states, “The effectiveness of the recently adopted anti-money laundering legislation has to be thoroughly followed. In this context, ensuring a strengthened supervisory framework is crucial to preserve Malta’s good reputation and attractiveness as an international financial centre”, with the country’s financial sector being “characterised by a large number of foreign institutions, in particular insurance companies, predominantly operating cross-border”.

Malta is an important international financial centre, the report points out, adding that, “Ensuring an effective legal framework to combat money laundering remains critical, given the size of Malta’s financial sector.”

More onerous iGaming regulations welcomed

The Fourth Anti-Money Laundering Directive, which came into force in June 2015, “was finally transposed into national law on 20 December 2017”, the report states. Before that, Malta had been facing European Court of Justice action over its failure to implement the Directive.

The Directive imposes more onerous obligations on iGaming companies to prevent money laundering, including the requirement for all gambling operators to conduct customer due diligence for transactions in excess of €2,000.

The Fourth Directive also sets an obligation for remote gaming operators, as subject persons, to appoint a Money Laundering Reporting Officer and to notify this appointment to both the Financial Intelligence Analysis Unit and the Malta Gaming Authority.

iGaming operators are also required to have systems and training in place to prevent money laundering and the financing of terrorism, such as customer due diligence procedures, the keeping of records and internal reporting procedures.

The transposition

On 20 December 2017, Malta transposed the European Union’s Fourth Anti-Money Laundering Directive into national legislation by way of publishing five separate legal notices.

The new regulations, which provide for a Register of Beneficial Owners amongst several other rules, came into force on 1 January.

In order to transpose the legislation, this week changes were made to the Civil Code, the Companies Act, the Trusts and Trustees Act and the Prevention of Money Laundering Act, in all comprising some 100 pages of new legislation.

Among the new rules for Maltese and Malta-based companies are:

·A requirement for companies to disclose their beneficial, or true, owners in a publicly available register.

·Data on the beneficial owners of trusts to be available to tax and law enforcement authorities, as well as sectors with an obligation to follow anti-money laundering rules, such as lawyers.

·A requirement for member states to verify beneficial ownership information submitted to their registers.

·Extending anti-money laundering and counter-terrorism regulations to apply to virtual currencies, provision of tax services and those dealing in works of art.

Information on the beneficial owners of a company will be made accessible to national authorities responsible for combating money laundering and terrorist financing; national authorities investigating or prosecuting money laundering; the Financial Intelligence Analysis Unit; national tax authorities and any other national authorities under the Prevention of Money Laundering and Funding of Terrorism Regulations.

Others who will have access to the Register will include those who require access for carrying out customer due diligence; any person or organisation that, upon a written request, can satisfactorily demonstrate and justify a legitimate interest shall, in accordance with data protection requirements, be granted access to the name, the month and year of birth, the nationality, the country of residence and the extent and nature of the beneficial interest of the beneficial owners of a company; those with a legitimate interest to have access to the register; those persons or organisations requesting access that will contribute to the prevention, detection and combating of money laundering or the associated predicate offences or the financing of terrorism.

Access to the information on the beneficial owners of a company held by the registrar in the Register of Beneficial Owners will be subject to on-line registration and to the payment of a €5 fee for every access to the information on the beneficial owners of each company.